UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For the Quarterly Period Ended March 31, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
Commission File Number 33-13058-C
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SURGIDYNE, INC.
(Name of small business issuer in its charter)
Minnesota
58-1
486040
(State or other jurisdiction of (I.R.S
. Employer
incorporation of organization)
Identification Number)
9909 South Shore Drive, Minneapolis, MN 55441
(Address if principal executive offices)
(763) 595-0665
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
periods that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. X YES NO
7,017,085 shares of Common Stock, no par value, outstanding at
March 31, 2000
Transitional Small Business Disclosure Format. YES X NO
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SURGIDYNE, INC.
CONTENTS
PAGE
FINANCIAL STATEMENTS
Balance sheets
3
Statements of operations
5
Statements of cash flows
6
Notes to financial statements
7
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS
March 31, December 31,
2000 (unaudited) 1999
ASSETS
Current Assets
Cash $ 79,743 $ 70,090
Accounts receivable, less
allowance for doubtful
accounts of $4,200 in
2000 and 1999 25,364 50,667
Inventories (Note 2) 189,885 182,310
Prepaid expenses 14,729 26,317
Total current assets 309,721 329,384
Furniture and Equipment, at cost
(Note 3) 352,887 333,396
Less accumulated depreciation and
amortization 325,051 323,759
Total furniture and
equipment 27,836 9,637
Other Assets
Patents and trademarks, net of
accumulated amortization of
$18,169 in 2000 and $17,980 in
1999 3,671 3,860
Deposits 3,529 3,529
Total other assets 7,200 7,389
Total assets $ 344,757 $ 346,410
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS (continued)
March 31, December 31,
2000 (unaudited) 1999
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Notes payable to officers and
directors $ 10,000 $ 10,000
12% demand note payable 11,646 11,646
Non-interest bearing demand
note payable 35,546 35,546
Current maturities of capital
lease obligation 4,400 -
Accounts payable 57,090 45,135
Accrued expenses 60,254 55,974
Total current liabilities 178,936 158,301
Capital lease obligation, less
current maturities 13,875 -
Stockholders' Equity
Series A Preferred stock,
authorized 1,600,000 shares;
$400,000 liquidation preference,
1,600,000 shares issued and out-
standing in 2000 and 1999 400,000 400,000
Common stock, no par value;
authorized 18,400,000 shares;
issued and outstanding
7,017,085 in 2000 and 1999 4,472,042 4,472,042
Accumulated deficit (4,720,096) (4,683,933)
Total stockholders' equity 151,946 188,109
Total liabilities and
stockholders' equity $ 344,757 $ 346,410
See Notes to Financial Statements
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
March 31, March 31,
Three Months Ended 2000 1999
Net sales $ 118,215 $ 128,779
Cost of goods sold 92,218 75,115
Gross profit 25,997 53,664
Operating expenses
Research and development 2,889 2,848
Sales and marketing 7,733 6,628
General and administrative 51,178 40,424
Total operating expenses 61,800 49,900
Operating income (loss) (35,803) 3,764
Other Income (expense)
Interest income 741 126
Interest expense (1,101) (892)
Other - 664
Net income (loss) $ (36,163) $ 3,662
Basic and diluted income
(loss) per common share $ (0.01) $ 0.00
Weighted average common shares
outstanding-basic 7,017,085 7,017,085
Weighted average common shares
outstanding-diluted 7,017,085 8,653,085
See Notes to Financial Statements
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
March 31, March 31,
Three Months Ended 2000 1999
Cash Flows from Operating Activities
Net income (loss) $ (36,163) $ 3,662
Adjustments to reconcile net income
(loss) to net cash used in operating
expenses:
Depreciation and amortization 1,481 850
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 25,303 42,575
Inventories (7,575) (11,172)
Prepaid expenses 11,588 (4,418)
Increase in:
Accounts payable and
accrued expenses 16,235 5,730
Net cash provided by operating
activities 10,869 37,227
Cash Flows from Financing Activities
Payments on capital lease obligation (1,216) -
Net cash used in financing
activities (1,216) -
Increase in cash 9,653 37,227
Cash:
Beginning 70,090 11,064
Ending $ 79,743 $ 48,291
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 498 $ 292
Equipment acquired under capital
lease $ 19,491 -
See Notes to Financial Statements
<PAGE>
SURGIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
Note. 1 Financial Statements
The Balance Sheet as of March 31, 2000, the Statement of Operations for the
three month periods ended March 31, 2000 and March 31, 1999, and the Statement
of Cash Flows for the three month periods ended March 31, 2000 and March 31,
1999 have been prepared by the Company without audit. In the opinion of
management, all adjustments (consisting solely of normal, recurring adjustments)
necessary to present fairly the financial position at March 31, 2000; the
results of operations for the three month periods ended March 31, 2000 and March
31, 1999 and the Statement of Cash Flows for the three month periods ended March
31, 2000 and March 31, 1999 have been made. The Balance Sheet at December 31,
1999 has been taken from the audited financial statements at that date. Results
of operations for the interim periods are not necessarily indicative of future
financial conditions or operating results.
Note 2. Inventories
Inventories consisted of the following:
March 31, December 31,
2000 1999
Component parts and
subassemblies $ 79,541 $ 81,182
Work in process 25,486 12,235
Finished goods 94,858 98,893
Less obsolescence reserve (10,000) (10,000)
$ 189,885 $ 182,310
Note 3. Furniture and Equipment
Furniture and equipment consisted of the following:
March 31, December 31,
2000 1999
Furniture, fixtures and
equipment $ 251,735 $ 232,244
Tooling and molds 101,152 101,152
$ 352,887 $ 333,396
Note. 4 Net Earnings (Loss) Per Share
Because the Company has incurred a loss in the period ended March 31, 2000 the
inclusion of potential common shares in the calculation of diluted loss per
share would have an anti-dilutive effect. Therefore, Basic and Diluted loss per
share amounts are the same for that period.
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations - 2000 compared to 1999
Sales. Sales for the first three months of fiscal 2000 were $118,215,
compared
to $128,779 in fiscal 1999, a decrease of approximately 8%. This decrease is
primarily attributed to decreases in contract manufacturing revenues to one
OEM customer. Contract manufacturing revenues for the first three months of
2000 decreased by approximately $20,000. This decrease was partially offset
by increased international product sales for the same period.
Gross Profit. Gross profit expressed as a percentage of sales decreased from
approximately 42% for the first three months of 1999 to approximately 22% for
the same period in 2000 due primarily to decreases in OEM sales to one cust-
omer and increases in international product sales. OEM sales to this one
customer yielded a larger gross profit and enabled the Company to absorb over-
head costs in a more efficient manner. Increases in international sales have
also effected gross profit since international product sales have a lower
gross profit.
Operating Expenses. Operating expenses increased from $49,900 for the three
month period ended March 31, 1999 to $61,800 for the same period in 2000.
This increase was due to increases in legal and accounting fees accompanied
with an increased salary expenses. Sales and marketing, and research and
development costs reflected little or no change between the two periods.
Year 2000 Compliance
To date, the Company has not encountered any problems with the change to the
year 2000. The Company upgraded both its computer hardware and software prior
to December 31, 1999 in anticipation of the year 2000. No delays in the shipping
or receiving of product have been encountered. The Company will continue to
monitor its systems and products on an on-going basis.
Liquidity and Capital Resources
At March 31, 2000 the Company had working capital of $135,185 compared to
$171,083 at December 31, 1999.
The cash flows provided by operating activities for the first three months of
2000 were $10,869, primarily due to a $25,303 decrease in accounts receivable
combined with a $16,235 increase in accounts payable to offset a net loss of
$36,163 for the first three months of 2000.
The Company plans to expand its line of related wound drainage products by
sourcing new products from low cost overseas manufacturers. These products are
expected to be available for marketing during the fourth quarter.
The ability of the Company to continue as a going concern and its short-term
liquidity is dependent upon obtaining additional debt and/or equity financing to
fund future development and operations. Long-term liquidity is dependent upon
the attainment of the short-term factors discussed above and greater sales
volumes that generate profitable operations. Increased sales volumes throughout
2000 depend largely on increased business from contract manufacturing, and
increased sales from existing and new products.
Forward-looking statement
This document includes forward-looking statements based on current expectations.
Actual results may differ materially. These forward-looking statements involve
a numbers of risks and uncertainties including, but not limited to, the receipt
and shipping of new orders for the Company's current products; the timely intro-
duction and market acceptance of new products and research and development
funding at the levels required.
<PAGE>
PART III. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K were filled during the three month period ended March 31,
2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SURGIDYNE, INC.
(Registrant)
Date: May 11, 2000 /s/
Vance D. Fiegel
By:
Vance D. Fiegel
President and Principal
Accounting Officer
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